We employ the geographic terms and definitions used by the Office of Management and Budget (OMB), most recently updated after the 2010 U.S. census. The OMB defines a metropolitan statistical area (MSA) as a region generally consisting of a large population nucleus and adjacent territory with a high degree of economic and social integration, as measured by community ties. With these parameters, the agency identifies 381 metropolitan statistical areas. County population growth accounts for the creation of new MSAs. If specific criteria are met, an MSA with a single nucleus and a population of 2.5 million or more is further divided into geographic areas called metropolitan divisions (MDs), of which there are currently 31. For example, the MSA of Philadelphia-Camden-Wilmington, PA-DE-MD-NJ, comprises three MDs (Camden, NJ; Philadelphia, PA; and Wilmington, DE). We include the smaller MDs in the index to reflect more detailed geographic growth patterns.
The table shows the components used to calculate the Best-Performing Cities rankings. The index measures growth in jobs, wages, salaries and technology output over five years (2010-2015 for jobs and technology output and 2009-2014 for wages and salaries) to adjust for extreme variations in business cycles. It also incorporates the latest available year's performance in these areas (2014-2015 for jobs and technology output and 2013-2014 for wages and salaries). In addition, it includes a measure of 12-month job growth (August 2015-August 2016) to capture recent momentum among metropolitan economies.
Employment growth is weighted more heavily because of its critical importance to community vitality, as is growth in wages and salaries, because it signals the quality of the jobs being created and retained. Other measures reflect the concentration and diversity of technology industries within the MSAs and MDs. High-tech location quotients (LQs), which measure the industry's concentration in a particular metro relative to the national average, are included to gauge an area's participation in the knowledge-based economy. We also measure the number of specific high-tech fields (out of a possible 19) whose concentrations in an MSA or MD are higher than the national average. Best-Performing Cities is solely an outcomes-based index. It does not incorporate input measures (business costs, cost-of-living components, and quality-of-life conditions, such as commute times or crime rates). These measures, although important, are prone to wide variations and can be highly subjective.
Components of the Best-Performing Cities index
|Job growth (I=2010)||0.143|
|Job growth (I=2014)||0.143|
|Wage and salary growth (I=2009)||0.143|
|Wage and salary growth (I=2013)||0.143|
|Short-term job growth (Aug 2015-Aug 2016)||0.143|
|High-tech GDP growth (I=2010)||0.071|
|High-tech GDP growth (I=2014)||0.071|
|High-tech GDP location quotient (2015)||0.071|
|Number of high-tech industries with GDP LQ > 1 (2015)||0.071|
Notes: I refers to the beginning year of index. Weights do not add up to 1 due to rounding.
Source: Milken Institute.